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Tariffs Could Raise Collision, Mechanical Repair Rates

Source: Brian Albright, SearchAutoparts.com

Almost every sector of the automotive industry has been critical of tariffs that the Trump Administration has imposed on aluminum and steel, as well as a number of products imported from China, and proposed tariffs on automobiles and parts have received an equal amount of pushback.

Both the existing and proposed tariffs could significantly raise the cost of automobiles and repairs. The insurance industry has also chimed in on the current U.S. Department of Commerce Section 232 investigation on proposed tariffs for vehicles and auto parts.

“Tariffs on auto parts could have a significant adverse economic impact on consumers, automobile repair providers, businesses, and insurers,” said Robert Gordon, senior vice president of policy research and international at the Property Casualty Insurers Association of America (PCI). “Tariffs on auto parts could cost the consumers $3.4 billion in personal auto insurance premiums alone.”

Those concerns were echoed in testimony from Auto Care Association President and CEO Bill Hanvey in testimony before the U.S. Trade Representative regarding the most recent Section 301 tariffs on Chinese imports.

“The greatest impact from this action will be on U.S. consumers who will experience higher repair costs, likely leading to the delay of critical vehicle maintenance procedures that may result in serious highway safety concerns,” Hanvey said. He used brake rotors as an example of a part that is no longer manufactured in the U.S. despite increased demand.

“Considering that there are over 2,600 different part numbers in the brake rotor sector, there is no viable option to meet the demand, nor any source of the parts in the U.S. market for every year, make and model vehicle on the road,” Hanvey said. “Therefore, regardless of any tariff imposed, brake rotors will continue to be imported, the vast majority from China.”

Using data from the U.S. Bureau of Economic Analysis, PCI has estimated that 60 percent of auto parts used in the U.S. are imported, and the proposed tariffs could raise auto repair costs by 2.7 percent. Additional costs could also affect commercial insureds and consumers who pay out of pocket for vehicle repairs.

“Increasing the price of automotive parts and causing disruption in the supply of auto replacement parts also could impede consumers from promptly repairing their vehicles and getting back on the road,” Gordon said. “Should the Administration impose restrictions on imports, we urge the Administration to exempt closely aligned markets that supply substantial percentages of U.S. auto part imports or to establish a process through which interested domestic parties can petition for product exemptions in a timely and transparent manner.”

In August, the Driving American Jobs Coalition, a group representing auto manufacturers, parts suppliers, auto dealers, parts distributors, retailers, and vehicle service providers, announced an initiative to oppose the tariffs.

The coalition includes the American Automotive Policy Council, the Auto Care Association, the American International Automobile Dealers Association, the Alliance of Automobile Manufacturers, the Association of Global Automakers, the Motor & Equipment Manufacturers Association, the National Automobile Dealers Association, and the Specialty Equipment Market Association.

“The proposed tariffs are an unwelcome tax on every sector of the auto industry,” said Christopher J. Kersting, President & CEO of the Specialty Equipment Market Association. “From the automakers to the many small businesses that comprise the specialty auto parts industry, tariffs on imported vehicles and auto parts pose an unexpected threat to a healthy American economy.”

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